Insights into the rise of China’s e-commerce giant
Insights into the rise of China’s e-commerce giant
11 September 2015
Chinese e-commerce company Alibaba is arguably the most successful company in the world right now. At US$25 billion, Alibaba’s initial public offering last September became the largest global IPO ever – larger than Google, Facebook and Twitter combined. Despite such an achievement, little is known about the Chinese behemoth – at least outside of China.
This makes Porter Erisman’s book Alibaba’s World: How a remarkable Chinese company is changing the face of global business, published this May, all the more interesting. Erisman joined Alibaba in 2000, becoming one of the first Western employees to work there. From 2000-2008 he filled the pivotal role of Vice President at Alibaba.com and Alibaba Group, and spearheaded the company’s international expansion. If anyone knows about the company and why it has become such a success it’s Erisman.
Here we ask him some questions about his time at Alibaba, his book and of course Jack Ma.
What were the biggest challenges of being the first western employee of Alibaba?
When I joined Alibaba there was little precedent for Chinese companies going global, so the biggest challenge was being at the intersection of cultures while China and the West were trying to understand each other. On good days I felt like I was serving as a bridge between East and West. On bad days it felt like I was serving as the cartilage between two bones that would otherwise destroy each other. But overall it was a lot of fun. I learned that the most important thing was to be flexible and go with the flow. It was more important to get along with staff and be a part of Alibaba’s team culture than to spend time rigidly defending a Western point of view of how things should be done. Often, my colleagues proved to me that, in fact, the Western way of doing business was not always the best way. I learned to adopt the local business culture of moving fast and valuing actions and results over theory and frameworks.
What set Alibaba apart from other e-commerce sites such as e-bay and Amazon?
Alibaba built a set of websites that truly fit the local customers in China. eBay simply tried to slap their US model on the China market. But e-commerce in China was simply too different from e-commerce in the US. In the end, the eBay and Amazon models simply didn’t work in China.
What advice would you give to a Western company trying to start doing business in China?
When coming up with a plan for China, forget everything you know about your home market and simply work backwards from the Chinese customer. It’s often important for Western businesses to radically depart from their original business models to develop something that works in China.
What were the main reasons that you wanted to join a start-up company from China?
I came to China in 1994 with the dream of joining a start-up someday. I had an interest in entrepreneurship and felt the opportunities and potential for adventure were much greater in China than in the US. Alibaba represented the intersection of both an industry frontier and a geographic frontier. I grew up in Denver, Colorado, listening to tales of the Wild West during the gold rush days. China represented the modern version of that. And it never quite felt like work since every day I got to see new places, eat new foods and improve my Chinese language skills.
What was the initial reaction from the company and Jack Ma when you told them you were going to write a book about the company?
Jack Ma was very open-minded about the idea. Jack started his career as a teacher and felt Alibaba had a responsibility to let entrepreneurs and students of entrepreneurship learn from Alibaba’s success and mistakes. And he felt that, as a foreigner working inside Alibaba, I was probably in as good a position as any employee to tell the story. When I raised the idea with him, I had to make clear to him that I would be telling the story from my own point of view, independent of Alibaba, including my own criticisms of Jack and the company. Fortunately he didn’t have a problem with it.
How early on did you realise the company was going to be a huge success?
Actually, I wrote the first page of my book back in 2001, but decided to put what I wrote into a drawer and suspend the project. The reason was because I thought there was a pretty good chance that Alibaba might go out of business and I didn’t think a story about a Chinese dot com that only lasted two years would make for a good book. Maybe a short article, but not a book. However, later that year Alibaba’s flagship website began to generate revenues and I became confident Alibaba would survive. But still I thought it would only amount to about a US$10million business. It was around 2004, when we began to pull ahead of eBay in China, that I began to see just how huge the potential would be for the company. In 2006, when eBay withdrew from China and left Alibaba alone with an open field ahead, I thought the company would grow to be about a US$100billion company. Even then I underestimated how huge the company would become.
What were the methods you used to counteract the scepticism you faced from the Chinese public about doing business online and not face-to-face?
It was really just a classic grassroots revolution. We went from city to city hosting seminars for small businesses trying to convince them to go online. Over the years, the seminars grew from tens of attendees to thousands of attendees. But because we put in the heavy lifting to get people to move online, we were able to capture a larger share of the market.
Do you believe that Alibaba can have the same impact in Western countries as it did in China?
I don’t believe that Alibaba can simply parachute into the West and try to launch a “Taobao US” or “Taobao Germany” to try to replicate its consumer success in more developed markets. But I do believe that it can have a huge impact in emerging markets, which share similar characteristics to China. That’s why you see them investing in countries like India, where they can support local players with similar visions for e-commerce. Besides their direct investments, you could say that Alibaba has already had a huge impact in these markets because all of the leading e-commerce players in Southeast Asia, India, Africa are modelling their businesses on Alibaba’s model, drawing inspiration from Jack Ma and his team.
Writer, broadcaster and practising psychotherapist Lucy Beresford will discuss her recently published novel Invisible Threads, a moving tale about women in India, at Asia House on Tuesday 6 October. See here for more information.